South Africa's central bank on Thursday cut its benchmark interest rate by 25 basis points to 7.75 percent, exercising caution amid mixed data and global uncertainty.
This comes after inflation fell to 2.8 percent in October, its lowest level since June 2020 during the COVID-19 pandemic.
Inflation may well be under control in the near future, Reserve Bank of South Africa Governor Lesetsja Kganyago told reporters.
However this was “highly uncertain” in the medium term given the high costs of food, electricity and water, as well as the possibility of insurance premiums and salary settlements.
Kganyago said although recent manufacturing data was weak, mining was strong and unemployment fell to 32.1 percent in the third quarter from 33.5 percent in the previous quarter.
He said South Africa's economic growth could be higher over the next year, given ongoing structural reforms, including electricity and transport networks.
“I think 25 basis points is cautious, and the environment is uncertain, and there needs to be caution,” he said.
“Global interest rates may move high again and the recent rand depreciation demonstrates how quickly changes in the global environment can affect South Africa.”
Kganyago cited higher-than-expected inflation in the United States and Britain.
Another contributing factor was uncertainty about the policies that the incoming government of Donald Trump would pursue.
In general “there is a growing concern about protectionism around the world, and concerns that the protectionism that we are seeing could impact global trade, and global trade is the lifeblood of the global economy”, Kganyago said.
AFP
(TagstoTranslate)South Africa
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